5 LEGAL RATIONAL FOR DUE DILIGENCEcomply with laws and regulationsidentify and solve legal problemsprotect an interested party from any legal liabilitydue diligence as used as defence in any lawsuitenable a legal claim against a defaulting party

6 Financial due diligence by financial advisor LEGAL RATIONAL FOR DUE DILIGENCETypes of due diligenceFinancial due diligence by financial advisoraccounting due diligence by auditorlegal due diligence by legal advisortechnical due diligence by technical consultant

7 I. LEGAL RATIONAL FOR DUE DILIGENCEMethods applied in the conduct of legaldue diligencemanagement discussion and analysisreview and summary of agreements and documentsrepresentations and warranties under agreementsissuance of legal opinion

8 I. LEGAL RATIONAL FOR DUE DILIGENCEFiduciary duties of directorsduty of careduty of loyaltyduty of obedienceduty of disclosure

9 I. LEGAL RATIONAL FOR DUE DILIGENCEObligations of directors under lawsduties of careno conflict of interestno competition with the business of the companyno sale , no purchase or doing business with the company unless approved by the board of directorsdisclosure of interest in any contract , shareholding and bondholdingno loan to a director or an employee unless made under the regulations on the welfare or any lawcomply with laws and regulations

11 SCOPE OF DUE DILIGENCE IN DIFFERENT TYPES OF TRANSACTIONSExamples of important lawsCivil and Commercial CodePublic Limited Company ActSecurities and Exchange ActForeign Business ActLand CodeInvestment Promotion ActIndustrial Estate Authority of Thailand ActFactory ActBuilding Control ActAct on Mortgage of MachineryForeign Employment Act Immigration Act

12 SCOPE OF DUE DILIGENCE IN DIFFERENT TYPES OF TRANSACTIONSExamples of important lawsRevenue Code and Double Taxation AgreementsCustoms ActExcise ActFinancial Institutions Business ActForeign Exchange ActEnvironmental Protection and Promotion ActCompetition ActLabour Protection ActAct on Establishment and procedures of the tax courtTrade Mark ActCopyright ActPatent Act

13 Conduct of legal due diligence SCOPE OF DUE DILIGENCE IN DIFFERENT TYPES OF TRANSACTIONSConduct of legal due diligenceAffidavit, Memorandum and Articles of Association and the list of shareholders shall be reviewed.Financial statements of the target company shall be provided.MOU is signed between a seller and a purchaser.Confidential undertaking is signed by the purchaser.A kick-off meeting between a seller and its advisors and a purchaser and its advisors.

14 Conduct of legal due diligence SCOPE OF DUE DILIGENCE IN DIFFERENT TYPES OF TRANSACTIONSConduct of legal due diligenceRoles of local advisors and foreign advisors.Data room and documentsList of requested legal due diligence documentsLegal due diligence questionsInterview directors and/or the managementSite visitPreparation of memorandumA draft and a final legal due diligence report

15 Legal due diligence report Disclaimer provision Executive summarySCOPE OF DUE DILIGENCE IN DIFFERENT TYPES OF TRANSACTIONSLegal due diligence reportDisclaimer provisionExecutive summary

17 Articles of association List of shareholders SCOPE OF DUE DILIGENCE IN DIFFERENT TYPES OF TRANSACTIONSCorporate documentsAffidavitMemorandumArticles of associationList of shareholdersHolding company, subsidiary, related company and affiliated companiesNotices and minutes of the meetings of the managementContinue

18 Notices and minutes of the board of directors meetings SCOPE OF DUE DILIGENCE IN DIFFERENT TYPES OF TRANSACTIONSCorporate documentsNotices and minutes of the board of directors meetingsNotices and minutes of the general meetings of shareholdersGroups of shareholdersA branchA representative officeA regional officeRegional operating headquarters

19 Corporate Issues to be focused upon Major shareholders SCOPE OF DUE DILIGENCE IN DIFFERENT TYPES OF TRANSACTIONSCorporate Issues to be focused uponMajor shareholdersAuthorized directorsRestriction on transfer of sharesImportant matters as approved by the board of directorsImportant matters as approved by the meeting of shareholders

21 government industrial estate private industrial estate Factories SCOPE OF DUE DILIGENCE IN DIFFERENT TYPES OF TRANSACTIONSIEATgovernment industrial estateprivate industrial estateFactoriestypes of factory licencesconstruction licenseuse of building license

24 percentage of the total assets percentage of the total revenues SCOPE OF DUE DILIGENCE IN DIFFERENT TYPES OF TRANSACTIONSMateriality testpercentage of the total assetspercentage of the total revenuespercentage of profitsmaterial adverse effect or changeLand Documentsland title deedsland utilization certificateland possession certificatemortgage and other encumbrances over property

25 Intellectual property trademark and trade service copyright SCOPE OF DUE DILIGENCE IN DIFFERENT TYPES OF TRANSACTIONSIntellectual propertytrademark and trade servicecopyrightpatent (product patent and process patent)know-howLicensing AgreementKnow-how AgreementTechnical Assistance Agreement

26 law on establishment and procedures of labour courtsSCOPE OF DUE DILIGENCE IN DIFFERENT TYPES OF TRANSACTIONSHuman resourceslabour protection lawlabour relation lawlaw on establishment and procedures of labour courtsEnvironmental complianceenvironmental impact assessment reporthealth impact assessment report

28 administrative courtsSCOPE OF DUE DILIGENCE IN DIFFERENT TYPES OF TRANSACTIONSCourtsConstitution CourtCourt of justiceordinary courts of justice- courts of first instance, courts of appeal and the Supreme Courtspecial courts of justice- labour courts, tax court, intellectual property and international trade court or IP and IT court, bankruptcy courtadministrative courts

29 place of domicile of defendant place of location of property SCOPE OF DUE DILIGENCE IN DIFFERENT TYPES OF TRANSACTIONSCourt forumplace of domicile of defendantplace of location of propertyplace of occurrence of tortplace of committing an offence

31 Double taxation agreements taxation of income taxation of capitalSCOPE OF DUE DILIGENCE IN DIFFERENT TYPES OF TRANSACTIONSRevenue Codepersonal income tax,corporate income taxvalue added taxspecific business taxstamp dutyDouble taxation agreementstaxation of incometaxation of capital

32 Examples of frequent opinions on laws and regulations SCOPE OF DUE DILIGENCE IN DIFFERENT TYPES OF TRANSACTIONSExamples of frequent opinions on laws andregulationsopinion on foreign shareholdingopinion on ownership and mortgage of land and buildingopinion on creation and enforcement of securityopinion on investment promotionopinion on joint venture and consortiumopinion on bankruptcy and liquidation

33 Opinion on use of a branch, an office or a subsidiary SCOPE OF DUE DILIGENCE IN DIFFERENT TYPES OF TRANSACTIONSTax opinionsOpinion on use of a branch, an office or a subsidiaryopinion on share purchaseopinion on asset purchaseopinion on sale of goods and provision of servicesopinion on royalty and service feesopinion on dividend and interestopinion on dividend and capital gains

34 Memorandum of understanding Term sheet sale and purchase agreement SCOPE OF DUE DILIGENCE IN DIFFERENT TYPES OF TRANSACTIONSLegal DocumentationMemorandum of understandingTerm sheetsale and purchase agreementshareholders agreementjoint venture agreementloan agreementsecurity agreement

36 III. AVOIDING PITFALLS AND SOLUTIONSAll material documents have not been disclosed.Some documents have severe legal issues.Documents are produced periodically.Documents are not completely provided.No correct, true and accurate information has been given.Complicated transactions and waxed issuesA limited period for legal due diligenceImportant issues are missing.An executive summary does not reflect significant issues.

37 III. AVOIDING PITFALLS AND SOLUTIONSProblemsLicences are not renewedFailure to meet financial ratio such as debt to equity ration and interest coverage ratioRestriction on foreign shareholding limitTrade secret and confidential informationInfringement of intellectual propertyNon-compliance with laws and regulationsTaxes are not paid or are incorrectly paid.floating chargenon perfect securityoutright and conditional assignmentsLegal cases are pending and are not updated.Business rehabilitation or liquidation of a subsidiaryNovation and assignmentLegal and beneficial interest

40 lease of land owned by a state enterprise IV. CASE STUDYCase studylease of land owned by a state enterprise2 sets of bank accounts- on balance sheet bank accounts and off-balance sheet bank accountRelated transactionsAcquisition or disposition of assetsLicences have not been renewed